Chris Dixon

last paragraph is exactly it. if people understood the stock market better they could time startups better. and vicecerca

Startup timing can only really be determined in hindsight so its often masked as “luck”, good or bad. Likely a mix of the two in most cases. But entrepreneurs can help themselves out by mapping out the ecosystem to figure out if they need to rapidly ramp up or extend the runway.

Good food for thought. I then guess that part of a good strategy would be evolving your product to fit the timing. Simplifying, typically.

Personally I’d downplay the timing factor in Youtube’s case. While the environment (and hence implicitly) timing is a factor, one could imagine in the parameter space of possible startups/products, a number of ways to ‘lead into’ youtube even if one were earlier in time. I co-founded a p2p video/image startup where we got plenty of stuff wrong (I wouldn’t use the excuse of it being bad timing).

I think there were quite a few details that Youtube nailed that differentiated their offering nicely and limited the copyright liability risk for a time (enough time to sell themselves out to google; e.g. flash, 10 min limit, longer tail of video vs music).

The timing aspect is interesting as it relates to the recruiting market also.

Still, I do heartily agree re the idea of matching burn rate to environment/timing. Thanks for your post!

I can’t agree more. How many initiatives, good ideas, great entrepreneurs … Failed because they saw the future too early.
Chris D. The key question you did not answer : how do you know that an idea is too early? When you are designing a product, believe me …every news, report, statistic … Looks like as proof of readiness. So challenging to have the right perspective on oness creation and keep enough lucidity to judge the timing.
Is there any patterns at Hunch to help entrepreneurs detect those signs of good/bad timing ? Thanks

I figure the number of people who can actually plan for the proper timing of a service or product is extremely low. Luck is an enormous part of it. What you do with you luck, however, is what differentiates the winners from the all stars.

you have to check various parameters all at same time..for you tube they need perfect timings to enter into the market for facebook they need proper marketing and interaction to rule over the market….for apple they need propers user taste to rule…..but its all in product startups….for service startups they required proper and strong technical client to start…..

3 slide deck?

Why this – market
Why us – team
Why now – timing

Some of these dotcoms around 1999,2000 where so close but just too far away. I did a CEO search for a startup called HollywoodScreenTest.com that generated a lot of interest at the time around the business model (yes, they had one). I think the model should have gone to T.V. then and excelled online now. Good vision, failure ended the run and now it is too late. Timing!

Golden advice! But wisdom and skill are needed to differentiate and stay the course.

“If you are trying to ride existing trends you should ramp up aggressively. If you are betting on emerging trends it is better to keep your burn low and runway long. This takes discipline and patience but is also the way you hit it really big.”

Also thank you for acknowledging that luck (IMO God) plays a part. We have to admit that there are many many things beyond our control that has to happen for a successful run.

Chris,

Great observations. The timing is right for something new, since people have heard the name facebook for quite some time now.

There are many “brilliant” minds out there putting together their businesses..online and offline, but they do not have that “it” factor to connect with the consumer. Youtube, google, facebook, twitter, etc have that it factor because of the platform/interface. top left corner of facebook.com. facebook is in lower case..simplicity. The overall user friendliness, picture sharing (tagging photos), status updates (twitter does the same of course, but there is no picture sharing like facebook). And on top of that..there was an interactive component of “poking” each other 3 years or so ago which created a lot of buzz and people still make jokes about it.

maybe the next new thing will have a different element of interaction. But, I believe in that it factor even more so than timing. As you mentioned about other sites which shared videos like youtube but did not succeed. Youtube..the name..easy to remember and simple interface.

Looking forward to reading more of your comments

With online video, things start getting interesting only when a critical mass of users can download one second of video in less than a second. This is when you can in fact have streaming. Streaming video sites started succeeding shortly after this threshold was reached.

Your point:

“Based on ‘pattern recognition’ (a dangerous thing to rely on), I was deeply skeptical of the space.”

Your parenthetic remark is both important and correct.

Uh, based on simplistic ‘pattern recognition’ NASA would never have tried to land a man on the moon.

Your analysis of why YouTUBE was successful seems good.

Then you continued with:

“Entrepreneurs should always ask themselves ‘why will I succeed where others failed?’ If the answer is simply ‘I’m doing it right’ or ‘I’m smarter,’ you are probably underestimating your antecedents, which were probably run by competent or even great entrepreneurs who did everything possible to succeed.”

Here you essentially make the mistake you warned about, that “pattern recognition” is “a dangerous thing to rely on”.

In one small step of more detail, there is at

http://venturehacks.com/

from

November 29th, 2010

a Naval Ravikant video where he just observes that in entrepreneurship and venture investing,

“Formula: There is no formula. There are no formulas. It’s all exceptions.”

So, we can’t use averages and have to look for exceptions to the averages. As I outline below, we actually CAN do this, with quite high reliability.

Here’s how to make some sense out of all of this:

First, major entrepreneurial success is a ‘rare event’ as in “many are culled; few are frozen”. Since we don’t believe that the economy can have every entrepreneur walk away with over $100 million, there can be only a few big successes. So, given how many entrepreneurs try, the ‘probability of success’ is small.

Second, averages from looking broadly at history, i.e., ‘in the rear view mirror’, are nearly useless for predicting rare events in the future, in particular, the rare entrepreneurial successes.

Third, the first problem with broad averages from the past is that they are too broad and, thus, a poor way to characterize success. In principle and usually in practice, it is possible, and fairly easy, to do MUCH better.

In one step more detail, we can argue in a quite solid sense that how to ‘exploit information’ is to do what in advanced probability is called ‘conditioning’ or ‘conditional expectation’ where the fully general version is based on the fundamental Radon-Nikodym theorem, yes, with a famous ‘one-stroke’ proof by von Neumann. So, we have information X and want information Y. So, how to we use X to approximate Y? Sure, we take the conditional expectation of Y conditioned on X. The usual notation is E[Y|X]. Yes, this is a generalization of the elementary notions of ‘conditional probability’ and is a fancy form of ‘averaging’ over, if you will, past data.

To apply this to ‘pattern recognition’, have to have X contain a lot of information in effect ‘close’ to the desired Y, and one way to do this is to pick carefully what ‘sample’ use in the average. So, if just pick ‘all entrepreneurial efforts’, then won’t see much. But if pick quite carefully from what I explain below, then can get some reassuring answers.

Fourth, as the artificial intelligence community eventually accepted, can’t get much ‘intelligence’ just from simplistic ‘rules’ based on simplistic averages and, instead, need what that community called ‘deep knowledge’. So, for an ‘artificial intelligence’ system to diagnose problems in cars, can’t hope to do very well with a rule like

When I hear “thump, thump”, then the cause is likely something sticky stuck to a tire.

Instead need to have ‘deep knowledge’ about the car, e.g., that there are four wheels, the engine is in the front, immediately to its rear is the transmission, with a torque converter, three forward gears, followed by a two speed overdrive, followed by a ‘transfer case’ to drive the front wheels, and followed by a drive shaft to drive the rear wheels, etc., on and on and on as any US male car nut knew VERY well by age 14.

So, if going to do well getting someone to repair your car, then don’t concentrate on broad averages from the general population but start with people who actually know a lot about how cars work.

Fifth, there actually are ways to pick projects and to evaluate fairly accurately in advance. Here the evaluation is based on some ‘deep details’, likely deeper than can be validated even by very narrowly selected averages.

A grand example is the success of the Wright Brothers: By any ‘averages’ at all, their chances were nill. But if looked at the back of their bicycle shop, saw their wind tunnel, saw how they could calculate wing lift and drag and propeller thrust and horsepower and had a good solution to the problem of three axis control and stability, then their chances were good. Or, their chances are awful but their chances conditioned on the extra information are good.

More generally, thankfully, we now have about 160 years of grand examples of doing important things for the first time and, for each, at the beginning knowing with quite high certainty that the project would be successful. E.g., if we boil water, make steam, use the pressure to push on a piston, pushing on a connecting rod, turning a crankshaft, then we can have a source of power that can do much better than horses and waterwheels. Not a lot of doubt. If we have some iron and brass and ways to work them and some simple lubricants, then we are well on the way.

Similarly for the transistor: When Shockley, Bardeen, and Brattain did their work, it was clear enough that vacuum tubes were on the way out — that’s JUST what Bell Labs saw in the 1930s AT&T very much needed and what Bell Labs made happen in the 1940s. The success of transistors was carefully planned and NOT a ‘fluke’; they did great science and engineering, were the first there, and “antecedents” were irrelevant.

The situation is similar for nearly everything important in the past 50 years in ‘aerospace’: E.g., for the F-22, it was quite clear and solid just what the thing would do before the first piece of metal or carbon fiber was cut, not from ‘patterns’ but from engineering.

We have engineering; we really do; sometimes we can engineer solutions to problems; and when we do there isn’t a lot of doubt.

Then here’s what’s wrong with your comment:

“probably underestimating your antecedents”

First, this comment is based on just a simple, broad average which is essentially irrelevant. Second, the comment ignores no ‘deep knowledge’. Third, the comment implicitly assumes without good evidence that others also did good engineering. An example of the problem of this assumption is just the Wright Brothers. Fourth, that others were “competent or even great entrepreneurs” is just irrelevant. What IS relevant is, did the present entrepreneurs do good work, e.g., good engineering. If the entrepreneurs are to be the first with a good solution, are they the first to do good engineering for this problem?

Of course the relevant, powerful tools are not just engineering but can also be applied mathematics, physical science, and medical science.

Indeed, for each solution, take all the people who have discovered it and then take the first such person; that person is an exception to your “are probably underestimating your antecedents”.

To HECK with the “antecedents” and also to “I’m doing it right” or “I’m smarter”; instead, just check the darned engineering or other technical work.

Am I asking for the impossible or the unknown? Absolutely not: Nearly everyone who got a Ph.D. in a technical field from one of the best two dozen or so US research universities did work, independently or nearly so, that was certified by a panel of experts as “new, correct, and significant”. That good work could be done for the first time was expected and not regarded as “underestimating” “antecedents”. Some concept of earlier “competent or even great entrepreneurs who did everything possible to succeed” is laughable.

Does all such research lead to entrepreneurial success? No and neither is it intended to. But if looking for entrepreneurial success, say, picking a big, hairy, nasty, unsolved problem that some hundreds of millions of people very much want solved and finding a good solution that is easy to deploy but difficult to duplicate or equal, then have a good shot at making such work for the first time the basis for entrepreneurial success.

Is this the only way to success? No. But this is the ‘paradigm’ so well illustrated and proven by the last 160 years or so of applied mathematics, physical science, medical science, and engineering. Denying that such success can happen with

“probably underestimating your antecedents”

is NOT good.

To resolve the issue is simple: Review the darned technical work. NSF, NIH, DoD, and research faculty in technical areas in the top two dozen US research universities all know these points in great detail with great clarity. It’s time ‘information technology entrepreneurship’ also understood.

For more, your:

“Almost anything you build on the web has already been tried in one form or another.”

The “almost” here makes this statement nearly irrelevant: Could also say that almost everything one could find on the forest floor has already been tried as a medicine in one form or another, and this statement is just irrelevant to the promise of powerful, valuable, new pharmaceuticals.

For your,

“Often the necessary conditions are only beginning to emerge and knowing when they will do so sufficiently is very hard to predict.”

No: We don’t need “necessary conditions”; instead, we only need “sufficient conditions”, and for those the past 160 years show in great clarity how to proceed: Pick an unsolved problem that many people with money very much want solved. Be the first to find a powerful solution that is difficult to duplicate or equal and that can be deployed widely and inexpensively.

The successes of Yahoo, Google, MySpace, LinkedIn, Facebook, Twitter, Zynga, and GroupOn do not need to restrict our range of problems to be solved or our ‘paradigm’ for finding solutions.

In particular we do not need to find necessary conditions for creating a fad for young women to use the Internet to gossip, shop for fashions, and look for dates.

There is a famous recipe for rabbit stew that starts out: “First catch a rabbit.”. Well, a recipe for entrepreneurial success delivering good solutions is, “First find a problem.”, hopefully unsolved where many people with money very much want solutions. Of course, the next step is, find a powerful solution that is difficult to duplicate or equal and that can be deployed widely and inexpensively.

What’s difficult here to understand?

Come on, Chris: Let’s get out of the LOL part of working for progress and get serious with the really good lessons of the past 160 years.

I think timing is also critical and I think there are some new considerations that are going to force people to adjust when they hit the market with their lean startup products. I recently attended a Google conference where they showed numerous online SAAS companies that gained social network traction and experienced exponential growth over a period of months that has previously been observed over a period of years.
Then the Google presenter – and they were focused on other items and not this growth – made a side comment along the lines of “of course we saw companies with subpar products tank will equal force”…
That is what stuck with me – in this day and age of constant communication if you do catch a trend wave and you are not up to speed then you might be done for good – even if you come out with a great new version of your products a few months later. What do you think? Is the age of “just put something out there” over?